Stock markets closed with significant losses on Wednesday, even as the Federal Reserve kept interests locked at near-zero, amid unusual trading activity fueled by online amateur investors.
The Dow Jones Industrial Average lost 635 points, or 2.1 percent, its largest drop in the past three months, while the S&P 500 erased its gains for the year, dropping 98.8 points, or 2.6 percent.
The drops were undeterred by Federal Reserve Chairman Jerome Powell, who backed additional fiscal support and dismissed concerns that it would lead to a spike in inflation.
President Biden is pushing a $1.9 trillion COVID-19 relief package.
But markets, which have been growing steadily since the original shock of the pandemic hit early last year, took a downswing amid an unusual phenomenon of amateur investors targeting certain stocks, and sending their valuations through the roof, upsetting short sellers.
Companies such as GameStop have seen their valuations climb and drop at extraordinary rates as online investing boards on sites such as Reddit have targeted them. GameStop’s value has risen six-fold since the start of the year. Major hedge funds betting that the stocks would drop have been backed into a corner and likely accumulated significant losses.